# Most Day Traders Lose Money: Evidence from Taiwan's Stock Exchange

Cite as: Gorak, R. (2026). Most Day Traders Lose Money: Evidence from Taiwan's Stock Exchange. Tradicted. https://www.tradicted.com/research/barber-day-2004/
Paper: Brad M. Barber and Yi-Tsung Lee and Yu-Jane Liu and Terrance Odean — *Do Individual Day Traders Make Money? Evidence from Taiwan*
Published in: Working Paper (2004)
Original: https://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/Day%20Trade%20040330.pdf

Key finding: More than eight out of ten day traders lost money in the typical six-month period on the Taiwan Stock Exchange from 1995 through 1999.

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Day trading is the practice of buying and selling the same stock on the same day. Barber, Lee, Liu, and Odean (2004) analyzed all Taiwan Stock Exchange traders, 1995–1999, in "Do Individual Day Traders Make Money? Evidence from Taiwan." Their dataset covered over 130,000 investors transacting at least $NT 1.5 million in day trades per six-month period. More than eight out of ten day traders lost money in the typical semiannual period.

## What the Study Found

Heavy day traders earned $NT 36.4 million in mean daily gross profits before transaction costs. After transaction costs, the same group incurred net losses of $NT 68.9 million per day. Only 19 percent of even the most active day traders earned net profits over any six-month evaluation period. The top profit partition—traders with standardized past profits above 0.2—earned a buy-sell return spread of 62 basis points per day. 65.9 percent of traders in that top partition continued to earn net profits in the subsequent period.

## Methodology

The dataset was the complete transaction history of all individual traders on the Taiwan Stock Exchange. The sample covered over 130,000 investors per average six-month period from January 1995 through December 1999. Individual investors were partitioned by prior six-month day trading volume or standardized net profits, then evaluated in the subsequent period. Transaction costs assumed were 10 basis points commission and a 30 basis point sales tax, with a 35 trading-day minimum for profit-based ranking.

## Key Statistics

| Metric | Finding | Context |
|---|---|---|
| Day traders losing money (semiannual) | More than 8 out of 10 | 7bp commission assumption; ≥$NT 90 million prior day trading |
| Heavy day traders' daily gross profit | $NT 36.4 million | Top three trading groups combined (≥$NT 90 million) |
| Heavy day traders' daily net loss | $NT 68.9 million | After 10bp commission + 30bp sales tax |
| Top profit partition: buy-sell spread | 62 basis points/day | Standardized past profits >0.2 |
| Top profit partition: % earning net profits | 65.9% | Subsequent six-month evaluation period |
| Lowest profit partition: % losing money | 97% | Standardized past profits ≤ -0.4 |
| Individual investors' share of day trading | 97.5% | Taiwan Stock Exchange, 1995–1999 |
| Day trading share of total volume | Over 20% | Taiwan Stock Exchange, 1995–1999 |
| Mean daily net profit per account (top profit partition) | $NT 7,532 | Annualizes to $NT 2.1 million at 280 trading days |
| Heavy day trader trades from aggressive orders | 74% | Investors with ≥$NT 600 million in prior day trades |
| Gross profits traced to aggressive orders (heaviest traders) | 83% | Top day trading activity partition |
| Group net daily profit formula | π_τ = Σ[S_b(P_b−P_c) − S_s(P_s−P_c)] − 0.001(S_bP_b+S_sP_s) − 0.003(S_sP_s) | Group-level net profit after commissions and sales tax |
| Mean standardized profit (ranking) | π/σ(π) | Used to rank investors; requires ≥35 trading-day observations |

## Why This Matters

Day trading's appeal persists despite negative expected returns, which the paper attributes to overconfidence rather than rational entertainment valuation. The NYSE and NASD adopted suitability-determination rules for day trading in September 2001, citing concerns about informed investor consent. A persistently profitable subset suggests some traders hold genuine execution or informational advantages over the broader market. Testing whether you belong in the profitable minority costs nothing in a [day trading simulator](/tools/day-trading-simulator/), where the intraday decisions are the same and the losses are not.

## FAQ

### What percentage of day traders make money?

More than eight out of ten day traders lost money in the typical six-month evaluation period. Using a 7 basis point commission assumption, only 19 percent with at least $NT 90 million in prior day trades earned net profits. The mean daily net loss per account for the heaviest traders was $NT 8,443.

### Do consistently profitable day traders show persistent performance?

65.9 percent of traders in the top profit partition—those with standardized past profits above 0.2—continued to earn net profits in the subsequent six-month period. In contrast, 97 percent of the lowest past-performance group lost money. The stocks bought by the top partition outperformed those sold by 62 basis points per day, sufficient to cover transaction costs.

### Do profitable day traders supply or demand liquidity?

74 percent of trades placed by heavy day traders came from aggressive limit orders. 83 percent of the heaviest day traders' gross profits traced to aggressive orders. The paper found that heavy day traders profit primarily by forecasting short-term price trends, not by supplying liquidity.

### What happens to day traders with poor past performance?

19.4 percent was the average increase in day trading activity for top performers in the ≥$NT 90 million cohort. Bottom performers in the same cohort decreased their trading by an average of 33.3 percent. The performance-activity relationship held across every activity partition tested in the study.

## Source

Barber, Brad M., Yi-Tsung Lee, Yu-Jane Liu, and Terrance Odean. (2004). Do Individual Day Traders Make Money? Evidence from Taiwan. Working Paper.

[Read the full paper →](https://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/Day%20Trade%20040330.pdf)